ISDS in the Canada-EU FTA (CETA) still an obstacle

July 16, 2018: AFTINET has previously reported on decisions in 2017 and 2018 by the European Court of Justice which found that foreign investor rights to sue governments in international tribunals (ISDS) was incompatible with national sovereignty and EU law. This means the European Parliament cannot decided to ratify agreements containing ISDS, and that each national government has to vote on ratification of agreements if they contain ISDS. These decisions followed strong European public opposition to ISDS.

Since these decisions, fearing that national parliaments will oppose ISDS, the EU has decided not to include ISDS in its recently-begun negotiations with Australia and New Zealand.

The CETA between Canada and the EU was finalised in 2016, before the European Court decisions, and included ISDS, but had not been ratified. In order to attempt to prevent rejection of the whole agreement by national parliaments, the European Council took a decision to apply the non-ISDS parts of the agreement provisionally from September 21, 2017. Canada has also agreed to this arrangement. This means that tariff reductions and other chapters of the agreement have been applied from that date. However, all EU national parliaments must ratify the whole agreement, including ISDS, before CETA with can be formally concluded by the European Council.

According to the official EU website, as of 20 June 2018, only 10 of the 27 EU states had ratified CETA with ISDS, and the Italian government has recently announced that its majority in the Parliament will oppose ratification.

If any states fail to ratify, only the non-ISDS parts of the agreement will continue to apply on a provisional basis. This is yet another demonstration of the growing opposition to ISDS in trade agreements.